Tag: Research

Comparison Shopping Engines Drive Sales

Rev your sales by driving comparison shoppers your way.

Could comparison shopping be the gas fueling tomorrow’s affiliate sales? In 2005, three of the top comparison-shopping engines pulled in a whopping combined $351 million, thanks to merchant commissions. Yet insiders at the top shopping- comparison sites say the best days are still ahead.

“Comparison shopping really is vertical search and its day is just starting to dawn,” Mike Aufricht, chief marketing officer of mega-shopping-engine Shopping.com, says.

Already the number of comparison shoppers online is growing faster than the number of new Internet users. comScore reports that the Internet audience grew 5 percent over 2005. The number of comparison shoppers, meanwhile, grew nearly twice that much, according to comScore.

What started as a way to directly compare prices and features for technology at various online retailers is now expanding to all kinds of products and services sold by retailers online and off. Some comparison engines categories are already top of mind, such as travel, books and soft goods like apparel. Others are just gaining a foothold, such as education, financial services, automotive, healthcare and real estate.

The result? Thirty-seven percent of those who went online or used an Internet application in January 2006 used a shopping comparison site, according to Nielsen// NetRatings. That’s a whopping 57 million consumers in January alone. In the financial category, 15 percent of financial consumers based in the United Kingdom used a price-comparison engine in January before picking their purchase – up from 6 percent in 2003, according to Forrester Research. And here’s the kicker for affiliates: Forrester also found consumers who use comparison sites spend 25 to 30 percent more online than those who don’t.

Affiliates, Start Your Engines

So what new revenues are affiliates bringing in by adding comparison-shopping engine functionality? A whole lot, if you ask affiliate David Felts.

In 2002, Felts had one website with static affiliate links organized in directory format. Three months into running it he received his first affiliate check: $22. He now runs 40-plus niche price-comparison sites pulling from a database of over 1 million products from more than 50 stores. His main site, iShopHQ.com, receives an average of 400 visitors a day. In December 2005, gross revenue from his network exceeded $9,500.

Providing the ability for his customers to view in-stock products from multiple vendors in an aggregated, yet simple, format “definitely gives me an edge over single- vendor affiliates, and helps drive sales,” he says. Vendor data feeds are automatically

downloaded and unzipped; data import jobs pull the new feeds into the database, and more jobs reconcile the inventory and rebuild the search index. The whole process kicks off every day at 2 a.m., giving up-to-date inventory daily. He hosts all the sites from his own server at his house using a business-class broadband connection. “As a Web application developer by trade, I was able to do all the programming myself,” Felts says, “and my search engine marketing background enabled me to leverage PPC and SEO to complement my affiliate marketing efforts.”

With search results filtered by price, price range, feature set, brand or whatever users want, price-comparison engines are indeed changing the process of comparison shopping, both on and off the Web.

“Rather than flipping through catalogs, writing down sale items from newspaper ads or scouring the Yellow Pages and calling local retailers,” says NexTag vice president of product shopping Mark Bradley, “[shoppers] can now conduct product – and

many services – in a few seconds with a few mouse clicks.”

While comScore’s mid-2005 study of consumer electronics comparison shoppers found 75 percent were merely window shopping, 25

percent did buy within the next 90 days. Only 10 percent bought online, though. That’s a figure top comparison engines are working hard to increase. Some have added buy-now incentives. Some have built-in peer pressure in the form of real-time blogs and peer-to-peer reviews. Some offer special deals only found online.

“Consumers are just beginning to understand the power of the Internet when it comes to shopping: comparison,” Farhad Mohit, founder of the Shopzilla.com comparison engine, says. “In the offline shopping world, there hasn’t been a service like this that lets you have all the choices for all the stores.”

While the Sabre system in travel allows people to tap in to all the flights and seats that are available, there is no Sabre for shopping. “In a very real way, we are building the Sabre in our industry,” Mohit says of today’s top comparison engines. “All of us are attempting to do this.”

But for affiliates, paying to be included in comparison-shopping sites is not very thorough searches for just about any seen as a benefit, according to industry observers. That’s primarily because most merchants are already sending feeds to the big comparison engines and since most of those charge a cost per click, rather than a percent of the sales price, click costs also quickly add up. For instance, Shopzilla collects the equivalent of 10 to 15 percent commission in click costs for every product sold. Affiliates would profit only if their commissions were substantially higher.

A few enterprising publishers are launching their own comparison engines, simply adding search technology within their existing catalog of affiliated merchant products. Take Pepperjam.com, which since 1999 has amassed a loyal following of a reported 6.5 million unique visitors monthly to shop its QVC-advertised collection of grandmother’s-recipe pepper jams and a growing assortment of affiliated merchant products. With more than $100 million in affiliate sales through LinkShare, Commission Junction and Performics in 2005, this 25-employee super-affiliate in March launched the Pepperjam Comparison Shopping Blog, its house-made search and customer review forum.

“Over the past six years, as we’ve grown as a company, we’ve received calls from a merchant or affiliate manager saying, ‘How can we work more closely with Pepperjam to get more sales for us?’ Now it’s going to be easy,” says Kristopher Jones, Pepperjam’s co-founder and CEO. Featured search placement goes to merchants who increase their commission or open a Pepperjam online merchant account and bid their product to the top. “With 6.5 million visitors already coming to our site,” Jones says, “now, in order to get the premier real estate on Pepperjam, [merchants] are going to have to give us more.”

While Pepperjam has more than 1 million products in its catalog, the largest product selections are found on the existing biggies of comparison sites, which include up to 100 million products each. So, the secret for most affiliates to profiting on this trend is to get in as an affiliate of a comparison-shopping engine already offering categories their site visitors need. Shopping.com, PriceGrabber.com, NexTag.com, Shopzilla.com and many other engines have affiliate programs, either through co-branding, custom banners or text links.

“Consumers are just starting to realize that general search is very difficult for doing shopping,” Shopping.com’s Aufricht says. “Consumers talk about the chaos that’s created by using general search engines to do their shopping. They talk a lot about having to click from a search engine to a website, back to the search engine, taking notes along the way, opening multiple browser windows simultaneously. That’s very unwieldy and very time-consuming. Shopping comparison engines allow you to do all of this very quickly from one website. It’s a value proposition that’s very appealing to consumers.”

Not the NASCAR Crowd

The purchase prices for three of the top engines that were sold in 2005 seem toconfirm industry

watchers’ expectations for growth. Shopping.com went to eBay for $634 million, Shopzilla.com was sold to media conglomerate E.W. Scripps for $525 million and PriceGrabber was acquired by Experian for $485 million, plus expenses.

Companies buying these shopping engines are justifying the hefty price tags with the promise of a potentially lucrative and loyal shopping following. NexTag’s Bradley says the demographics for electronics is typically higher income/higher education, while there is a more broadbased appeal for apparel and sporting goods – those run the full gamut when it comes to education and income.

With the addition of such categories as education and healthcare, across-theboard comparison shoppers are “a very general audience now,” Bradley says. “We touch a lot of people simply shopping for anything online.” Meanwhile at Shopzilla, “women are our target demographic; 70 percent of women use Shopzilla.com,” Mohit says.

Though you may think of comparison shoppers as cheapskates, they’re not. At Shopping.com, Nielsen//NetRatings reports 42 percent of its shoppers have household incomes of more than $75,000 and 48 percent hold at least a bachelor’s degree. Shopping.com also reports 80- plus percent of its shoppers prefer to shop for brands they trust, with less than 10 percent considering lowest price to be the primary driver behind their buying decision. According to comScore Media Metrix, that translates to five times the revenue per lead of other leading portals and search engines.

PriceGrabber brings in all ages, from 18 to 54, with high incomes (users report an average yearly income of $71,000) and college educations (77 percent). The average order is $450. NexTag, meanwhile, seeks to “close that gap between the savers and the non-savers,” Bradley says. “Since comparison shopping is morphing from lowest pricing and grabbing to social shopping, we’re adding in content, recommended merchants, special deals and coupons that you can’t get anywhere else.”

For now, online comparison shopping is anyone’s race. “You put all those numbers together,” says comScore chairman Gian Fulgoni, “and what that says to me is: It’s having a pretty major impact on the way consumers spend their dollars.”

Fine-tuning Your Engine

As far as placing your comparison engine on your site, “every site’s different,” Bradley says about comparison search engine box placement. “Above the fold is the best, but it really depends on their navigation and how they have their advertising laid out currently. You can do very effective testing over a month’s period.”

Must-haves are things like images, product reviews and search technology that allow users to not only search by general search terms, like shirts, but also search for specifics like a camera make and model, and corresponding product reviews. At the least, says Peter Koning, a British Columbia-based M.B.A. and founder of Affiliate-Software- Review.com, “affiliates need to get to that next stage if they want to survive, as more technology is used in the shopping experience,” he says.

“It comes down to basic business principles: If you understand your audience and are listening to them and answering their

questions, then you need to go a little further and give them a little help so they can self-serve and educate themselves. Try to separate yourself from your bias as an affiliate, where you only get paid for a sale, with the real challenge of establishing your credibility so they are willing to trust you. At minimum, put up a one-page comparing products on your site. Show them you’re not biased and you’ll really provide value,” Koning says.

You’ll also want a defined marketing message. In January, Forrester researcher Benjamin Ensor found that price comparison sites aren’t top of mind even for previous users. “The more we can educate consumers when they first come to us through a search engine, the more likely they are to return,” Shopping.com’s Aufricht says. The message is simple, he says: “We need to generate awareness that comparison shopping exists and the advantages of consumer search engine sites. The biggest advantage is to be able to search across millions of products across thousands of merchants. As a result, you’re going to find the right product, at the best price, and probably most important, do it with the least amount of effort.”

For the 10 percent or more searching exclusively for price, University of Indiana Professor and new-economy researcher Michael Baye in 2005 uncovered some stats that make good promotional verbiage for site visitors: “Consumers save 18 to 20 percent, on average, by comparison shopping for products online versus visiting the nearest brick-and-mortar retail outlet.”

Here’s Shopzilla’s marketing strategy: “We have a higher conversion rate because we prepare our shoppers in advance to make a purchase once they click on a listing,” Mohit says. “By having all the information up front, they’re not going to click on a listing that doesn’t make sense to them.”

NextTag’s marketing advice comes from Bradley: “Reviews for merchants that don’t have brand-name recognition are very important. If a customer comes in and hasn’t heard of that merchant, reviews from satisfied clients definitely help them make a sale.”

The Finish Line

And there’s plenty more for comparison shopping down the line: Yahoo Shopping, with 100 million products in its database but no engine affiliate program as of yet, will be the first to bring out a comparison- shopping service for mobile phones. “So you’re at point of sale and simply type in the product model number and have access to comparison information,” says Rob Solomon, vice president of Yahoo! Shopping Group. “That is a game changer from a consumer perspective, because it gives a lot more power to consumers on price. In the future, they will be able to scan in a bar code or take a picture of the product. It’s just a phone call, and it isn’t an incremental cost at all (depending on your phone plan). You could also use a pay-per-call technique in the future; I can imagine a universe where that happens fairly soon. It’s nascent, but it’s coming and it’s very interesting.”

Whether turning to an existing comparison engine or launching your own, experts say you’ll do well to get in now. “The general question is whether online shopping is going to continue at its torrid pace, but it’s tough to see it slowing down anytime soon,” says comScore’s Fulgoni. Even better news: “On top of that, when users go to broadband, their spending rates just rocket, plus the broadband user is spending 35 percent more time online,” he says. “This just plays into the hands of anybody that’s offering a value-added service online. Comparison engines have got to be one of the beneficiaries.”

JENNIFER D. MEACHAM is a freelance writer who has worked for The Seattle Times, The Columbian, Vancouver Business Journal and Emerging Business magazine. She lives in Portland, Ore.

The Research Report

How online marketers use facts, figures and forecasts.

Studies, polls, reports, surveys, statistics and forecasts. Every day the latest data on the most current trends is widely disseminated and distributed. Want to know which demographic group is most likely to spend more online, to have broadband or to download music? There’s data out there that purports to have the answers.

There’s no dearth of data, for sure, but just how much of this mountain of market research is useful for online marketers who need to make crucial business decisions is up for debate.

Kathryn Finney, a.k.a. The Budget Fashionista, uses reports from Forrester Research and comScore to learn about the top sites in women’s apparel. This gives her an idea of “who to target, who to partner with and to get an idea of where the industry’s going.”

Joe Zawadzki, founder and president of Poindexter Systems, which provides online ad management services, is less convinced about the value of some market research. “Once that research is made public, the opportunity to capitalize on that information is gone. Private data is the key.” Zawadzki says public research does have its uses, claiming it’s good for sales and venture capital fund-raising.

Some merchants claim research is helpful to them in a variety of specific areas, including understanding the competition.

Catherine Paschkewitz, manager of Consumer Marketing at HP Home & Home Office Store, which has partnerships with Forrester, JupiterResearch, eMarketer, comScore and Hitwise, says HP wants to see how Hitwise is working with the competition, which helps to understand and plan campaigns.

“We want to see how we rate versus our competitors,” says Paschkewitz. “We also do studies around search behavior and research to see how we can further optimize our program.” HP commissions comScore to create some of this custom research, but also relies on its own customer base for information, overlaying Claritas data and performing usability studies internally.

“Research is part of a process,” she says. “One part is up-front planning – looking at affiliate sites via Hitwise to see their traffic and customer profiles.”

When the HP Home & Home Office Store launched its affiliate program, for example, the team wanted to make sure it would succeed, so they researched what was working for the affiliate market, and talked to affiliates, managers and merchants who had affiliate programs, in addition to looking at research on the subject, Paschkewitz says.

HomeGain’s Affiliate Manager Marie Nilsson says merchants often use research to start a campaign.

“[It] is actually a piece of your research project in a sense, if you document your findings, draw conclusions and use it for optimizing your future campaigns,” she says. “That’s the beauty of advertising on the Internet: Provided you have the right tracking tools in place, you are able to measure each move.”

Nilsson says that once you have some experience, the research process is easy.

“As a merchant, you understand how your channel works by launching campaigns and documenting every step of the way, noting all the details, such as placement, targeting, creative used, time of year, close rates, conversion rates, CTR, pricing, etc.,” she says. This type of data becomes your future research. “Every campaign can be looked upon as an individual test in a series which compiles a research project if you outline, structure and target your tests.”

HomeGain obtains its research in several ways. It gets monthly Hitwise information, which Nilsson says “is great for understanding what your competition is doing.” The company also internally compiles metrics and data. “We use census information, which is free. We also do consumer surveys on a regular basis, all in-house,” Nilsson says.

But not all research is relevant for a merchant’s business, according to John Joseph, Performics’ senior vice president of affiliate marketing. He claims that merchants are very interested in statistics regarding overall ad spend and retail figures. “A year from now, merchants will really start using the demographic info that’s available,” says Joseph.

However, the use of research appeared to be a sensitive subject for many merchants. Calls to BestBuy.com went unanswered. Representatives from Walmart.com and Target.com declined to comment, on the grounds that this type of information is proprietary.

The Affiliate Perspective

FatLens’ co-founder and president Siva Kumar says the research his company finds the most useful is “learning about other companies with similar challenges and business models to us. We meet with and share experiences with many of the marketing personnel of other companies.”

However, Kumar notes that, “While we have perused published research from establishments like Forrester and find the information interesting, the high-level nature of the reports is not as relevant for daily decision making.”

FatLens relies on its own traffic and revenue performance data as research, because it is the “best way of learning about what is working and what we should expect to see as results.”

He claims that this type of information is most critical to help FatLens in modifying its programs as well as experimenting with new methods of traffic and revenue generation. “Our growth as a company from inception to our current revenue and traffic levels over the last nine-month period is mainly due to the research we have done on the various online customer-acquisition techniques for similar companies in terms of market segment and business models,” Kumar says.

Melissa Salas, senior marketing manager at Buy.com echoes Kumar’s reverence for research.

“It’s essential for marketers to be well-informed about industry reports, analyst projections, shopping trends, product announcements and reviews, as well as critics’ remarks. With this knowledge, you can position your company to meet your overall business objectives.”

Salas claims that marketing campaigns benefit from research as well. “Being a multi-category retailer, it is imperative to stay on top of best sellers and new product releases so marketers can create specific promotions to gain market share,” she says.

Research = Understanding

“Consumer research leads to insight,” Greg Smith, executive vice president of media, insights, planning and analytics at interactive agency Carat Fusion, says. “It gives you ideas of where to place ads.” Smith cites a past campaign in which research led his agency to recommend positioning minivan ads on parenting and kids’ sites as well as on car sites.

Smith says Carat Fusion’s use of research depends on the client’s objective, be it marketing or branding. Marketing efforts are most always motivated by sales, so the results are measured in straightforward metrics and the agency can move from site to site until it finds the best results for the client. With branding, clients are usually looking to change perceptions and attitudes, which makes the process a bit more complex. Here, Smith would use research to define the target, and then figure out where to find that audience in large numbers. Later in the process, Carat conducts “follow- on advertising” to find out if consumers bought the advertised product. The results are then presented to the client.

Carat Fusion has relationships with AdPlan (owned by AGB Nielsen Media Research) as well as comScore, Forrester and Jupiter. Smith says the company also researches its campaigns by analyzing search results and chat rooms to find out how a product is thought of, and speaking to consumers themselves.

Going Deeper

Former JupiterResearch analyst Gary Stein, now director of client services at BuzzMetrics, has noticed a trend of late that companies are conducting deeper research on the front end. Syndicated search from companies such as Jupiter, Forrester and Fathom Online acts as “preventive medicine” for their clients.

Stein estimates that clients usually have 90 percent of their campaigns nailed down, with ads placed on high-profile sites, but that the remaining 10 percent is “haphazardly planned.” That’s where research comes in – to offer insights to fill that gap.

Some research is suspect, Stein says, such as financial surveys sponsored by brokerage houses. To find reliable data, Stein recommends finding an objective source with a good track record, looking at several studies and in the end, making your own estimates. It’s an economic issue for many companies, because to get a good survey sample, they have to pay for each person, says Stein.

Stein believes some research is misleading, not in the spin it receives or the headline it gets, but in the very questions it puts forth. For example, Stein sites one study that asked, “Would you use a Bluetooth-enabled device?” of consumers who were not likely to know what a Bluetooth-enabled device was.

The best surveys are those that are weighted properly, according to another former Jupiter analyst who asked not to be named. “Numbers are good, but demographic variables are better.” He claims that most surveys by the well-regarded resources are properly weighted (see Research sidebar).

Pulse of the People

Most research industry insiders note that the majority of statistics are garnered from the U.S. Census data, released every 10 years. One company that has census information to power its business is Claritas. Prizm NE (short for New Evolution) is the company’s signature product. Introduced in 2003, it’s updated whenever there is new census data.

Prizm NE is a segmentation tool that divides the population into 66 categories based on a “geodemographic system” revealing behavioral and consumer activities. The product uses the census as its primary source, but is also infused with data from private sources and other governmental data. The 66 categories, which include controversial names such as “Shotguns & Pickups,” change based on the census. When the last report was issued in 2000, 26 names stayed the same, bringing 40 new ones to light. The geography is based on zip codes, with the census data as the foundation.

“Our syndicated services definitely affect online marketing decisions,” claims Bill Tancer, general manager – global research at Hitwise, which resells Prizm NE data. Hitwise provides research including “benchmarks so customers can see where they rank, and click-stream analysis to see why they have that rank.” Hitwise also offers traffic information so clients can see how users are getting to their sites, as well as the sites of the competition.

The majority of online marketers obtain research from established companies in the field. But smaller companies are popping up with some new ideas. Cydata Services owns T3report.com, a site that spotlights products such as T3 Competitor Report and T3 Affiliate Report (see Revenue March/April issue). These products allow affiliate managers to get the info they need to copy competitors’ marketing plans and potentially poach affiliates.

Having worked exclusively in the adult entertainment industry to date, Cydata recently turned its attention to the performance marketing arena. While some may find the company’s tactics unethical, Cydata founder and CEO Brandon Shalton claims his company is simply providing a shortcut to success, even though he does admit it is “a very disruptive service.”

He likens Cydata’s clients to smart fastfood chains, which shouldn’t “bother with all the research – just move in across the street from McDonald’s, because they’ve already done the research.” Shalton believes the T3 products let you “advertise smarter.”

Joe Pilotta, Ph.D., vice president of Big Research, feels his company is offering a unique service as well. “We produce more of an index of what the influence is on category of merchandise purchased. Our clients don’t need click data, etc., because it’s not that important.” Pilotta says his company’s data is created by sales and future intentions, so it’s never static.

Big Research obtains its data from established panels, and occasionally invites offline participants, such as listeners from radio stations, to weigh in. The company conducts its Simultaneous Media Study twice a year, which analyzes 32 different types of media. To get a complete consumer’s point of view, the study surveys 14,000 to 15,000 people.

Predicting the Future

Just as research reports and surveys of past activities play a big role in online marketing decisions, so do predictions for the future. “Forecasts give a gauge of how to prioritize – is search as big as we think it is? People want verification that people are spending money on a sector and that it’s growing,” Shar VanBoskirk, senior analyst on Forrester’s marketing strategy and technology research team, says.

HP’s Paschkewitz uses forecasts to plan for her company’s future, but adds in the site’s own data to get a more accurate picture.

Like most industry watchers, who claim that forecasts play a more valuable role for publishers rather than retailers, Performics’ Joseph says merchants don’t really act on general forecasts, such as last year’s hype of the potential of the Hispanic market (see Revenue March/April issue).

Big Research’s Pilotta says his clients definitely use forecasts to make decisions. Since the company releases its Consumer Intentions and Actions forecast every month, his clients are working with “fresh data” from 10,000 people.

“We use forecasts and trend reports to ensure that our infrastructure planning is adequately matched to the expectations of the market, FatLens’ Kumar says. “The trends also help us judge relative performances of the various marketing channels we are using and adjust our spending according to industry directions.”

Buy.com’s Salas agrees. “Reviewing forecasts and trend reports is an important part of preparing for the future of your business. Our marketing team makes business decisions based on internal customer behavioral data in addition to accurate and reliable forecasts, trend analyses and competitive intelligence,” she says.

HomeGain’s Nilsson says her company watches trends in the online real estate and marketing fields.

“We see a big shift now from a seller’s market to a buyer’s market. It’s a nationwide trend – the question of 2006 in real estate is ‘The Year of the Buyer?'”

Nilsson’s company also keeps an eye on housing price trends in local areas, as well as changes in the competitive landscape.

“For real estate, smaller online players with great technology and VC [venture capital] backing, like Zillow.com, posed a threat in the beginning of 2006. We saw this coming at an early stage and answered with adding more local neighborhood data and by marketing our free home-valuation tool more aggressively,” she says. “Another example is foreclosed homes. A lot of homeowners have interest-only, adjustable-rate mortgages; they are going to get hit hard as rates rise, and a larger percentage will default and go into foreclosure. In anticipation of this, we’ve deepened our partnerships with the foreclosure companies.”

While many statistics are dismissed as obvious or hype, data often provides merchants, affiliates, analysts and even researchers themselves with an idea of how to improve their marketing messages and overall businesses.